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The World Price For Aluminium Is Already Included In Your New Power Contract With Meridian

Stop crying wolf shut the
smelter and bugger off

Every time that Rio Tinto, the gargantuan mining and processing transnational which owns 80% of the Bluff smelter, feels that its charmed existence in New Zealand is going to become less cushy, it threatens to pull the plug, close the smelter and walk away. Last time it did so (in 2008) was because of the Labour Government’s proposed emissions trading scheme. This time it is trying it on as a tactic to try to pressure Meridian over its power price contract, which has already been negotiated and is due to take effect in January. It has succeeded in whipping up a storm of uncertainty among its workers, the union representing some of them, the Southland public and their local body politicians.

Rio Tinto has relentlessly peddled the line that its new power price from Meridian – which hasn’t even taken effect yet – must come down, because of the falling world price for aluminium. But what it hasn’t said is that: “The agreed base price is subject to escalation with reference to a multi-year average market price for electricity in New Zealand, the world price for aluminium (as determined by an independent benchmark), and a component as proxy for price inflation”. The quote – with our emphasis added – is from Meridian’s latest financial reports. In plain English, the world price of aluminium is already factored into its new power contract with Meridian.

Once again, Rio Tinto is just trying it on, with every expectation that Meridian will fold. And why wouldn’t Rio Tinto expect that? For the past nearly 50 years it has twisted every New Zealand government and State-owned electricity supplier around its little finger. The Campaign Against Foreign Control of Aotearoa (CAFCA) calls upon Meridian to break the mould and surprise us all by sticking to its guns.

And we call Rio Tinto’s bluff (pun intended). Stop crying wolf, stop using your New Zealand workers as disposable pawns in your cynical game, stop holding Southland and the country to ransom. Go ahead and close the smelter and bugger off. See if we care, the country will be much better off without you.

Don’t take our word for that. Transpower’s Chief Executive, Patrick Strange, told the media this month that if the smelter closes, the surplus power would go to the rest of the grid, meaning lower prices for consumers. CAFCA says bring on the lower prices for long suffering consumers who have been waiting since the 1990s for any tangible benefits from the “electricity reforms”. All we’ve seen is ever increasing power prices.

The smelter closes = lower prices for consumers

The smelter is the country’s single biggest user of electricity, consuming one sixth of the total, 24/7 for more than 40 years. It pays a top secret super cheap price that is not available for any other user and all it does is export electricity from NZ in the form of alumina, while being subsidised by all other electricity users. The smelter is the textbook example of corporate welfare in New Zealand. It is the biggest bludger in the country. Those who extol the bracing discipline of market forces for everybody else are strangely coy when it comes to this corporate recidivist.

Rio Tinto won the 2011 Roger Award for the Worst Transnational Corporation Operating In Aotearoa/New Zealand. It was nominated for lobbying two Governments “over several years to secure excessive allocations of free emissions units under the NZ Emissions Trading Scheme”.

The Roger Award judges agreed, concluding: “It appears therefore, that the New Zealand taxpayer is subsidising a transnational corporate rort of the emissions trading scheme… The significance of this stance cannot be underestimated; a major transnational player within New Zealand materially benefits from its non-compliance with a strategy to reduce global climate change and its ecological effects”.

The Judges’ Report concludes that the company has a 50 year history of “suborning, blackmailing and conning successive New Zealand governments into paying massive subsidies on the smelter’s electricity; dodging tax, and running a brilliantly effective PR machine to present a friendly, socially responsible and thoroughly greenwashed face to the media and the public. Its milking of the Emissions Trading Scheme is entirely in character”.

Equally undeniably, it has been good for Southland, in terms of jobs, etc. So what about the people who work for the smelter, directly or indirectly? The tobacco industry used to employ a lot of people here, but that was deemed to be no longer in the public interest. Lacing lollywater with booze and selling it to kids supports a lot of jobs too but there’s plenty of public demand to get rid of that particular industry as well. The P industry provides an income for thousands of people too, but we don’t hear any demand for that insidious trade to be kept going to keep them in a job. History is full of examples of horrible industries that kept people in jobs (such as the slave trade) but which were banned and/or abolished for the greater good.

This smelter constitutes a crime against the people of New Zealand and has done for its entire existence.
In the national interest, it must be closed and the sooner the better.

The Government’s proposed partial privatisation of Mighty River Power, Meridian and Genesis Energy has focused attention on the ownership of our State-owned electricity generation companies. The majority of New Zealanders oppose the likelihood of such vital national infrastructure going into foreign ownership.

But what about the State-owned company which “owns” the South Island power grid? Does Transpower actually own that? Members of the Campaign Against Foreign Control of Aotearoa (CAFCA) will be asking that at

Transpower’s Annual Public Meeting

.

George Hotel, Christchurch,

.

4 p.m.

.

Thursday October 18th

(the CAFCA banner will be displayed outside the venue from 3.30 p.m.)

Here’s what we know about the ownership of the South Island grid. Excuse us if the explanation is complex; that’s because the deal was deliberately structured to be complex.

In 2003 Transpower sold the South Island grid and leased it back.

The buyer of the grid was the US-based Wachovia Bank;

The leaseback of the grid runs through the Cayman Islands, a tax haven;

The leaseback of the grid runs for about 100 years, but Transpower has the option to repurchase the grid after about 25 years;

The deal was tax-driven. At the time, it was being arranged, an inquiry into abusive tax avoidance schemes was underway in the United States. A ban on this particular type of deal (lease to service) took effect from just days after this deal was signed;

Transpower delayed for a year showing the one-off profit effect in its financial report because of uncertainties related to the tax inquiry.

That meant that Transpower is the operator (not the owner) of the South Island grid. During the early days of the current global financial crisis, Wachovia was taken over by Wells Fargo, another American bank.Transpower’s 2012 Financial Report states that, in November 2009, Transpower partially terminated the cross-border lease over the South Island grid. However, that same Financial Report contains material which suggests that the cross-border lease is continuing. The effect of the cross border lease was to duplicate ownership of the grid, so that ownership could be claimed in the United States as well as in New Zealand.

We call upon Transpower to explain:

What is meant by partial termination of the lease?

Can any US organisation still claim today that it owns the South Island grid? Yes or no?